Cropper v. Comm'r

• Decision Date: 22 June 2016
• Docket Number: No. 15-9003,15-9003
• Citation: 826 F.3d 1280
• Parties: James Cropper, Petitioner–Appellant, v. Commissioner of Internal Revenue, Respondent–Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

826 F.3d 1280

James Cropper, Petitioner–Appellant

v.Commissioner of Internal Revenue, Respondent–Appellee.

No. 15-9003

United States Court of Appeals, Tenth Circuit.

Filed June 22, 2016

Lowell H. Becraft, Jr., Huntsville, Alabama, for Petitioner–Appellant.

Janet A. Bradley, U.S. Department of Justice, Washington, D.C. (Caroline D. Ciraolo, Acting Assistant Attorney General, and Bruce R. Ellisen, U.S. Department of Justice, Washington, D.C., with her on the brief), for Respondent–Appellee.

Before MATHESON, BALDOCK, and MORITZ, Circuit Judges.

MORITZ

, Circuit Judge.

When the Internal Revenue Service notified James Cropper of its intent to collect unpaid taxes by levying his property, Cropper requested a collection due process (CDP) hearing with the IRS Office of Appeals. The Office of Appeals determined that the IRS could proceed with the proposed levy. Cropper sought judicial review, and the United States Tax Court sustained the Office of Appeals' determination. Because we agree with the Tax Court that the Office of Appeals didn't abuse its discretion in determining that the IRS could proceed with the levy, we affirm.

Background

Preliminarily, in order to place the relevant facts in context, we find it helpful to summarize the statutory and regulatory context in which the facts developed.

The IRS has authority to collect a tax by levying the property of a taxpayer who fails, within 10 days of receiving a notice and demand, to pay the tax owed. 26 U.S.C. § 6331(a)

. Before exercising that authority, the IRS must notify the taxpayer of (1) the IRS' intent to levy the property, see

id. § 6331(d)(1), and (2) the taxpayer's right to a CDP hearing, see id. § 6330(a)(1).

In the CDP hearing,¹ a taxpayer may raise “any relevant issue relating to the unpaid tax or the proposed levy including—(i) appropriate spousal defenses; (ii) challenges to the appropriateness of collection actions; and (iii) offers of collection alternatives.” Id. § 6330(c)(2)(A). The taxpayer may also challenge “the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.” Id. § 6330(c)(2)(B).

As part of the CDP hearing, the Office of Appeals must “obtain verification from the [IRS] that the requirements of any applicable law or administrative procedure have been met.” Id. § 6330(c)(1). And it must consider that verification in determining whether the IRS can proceed with a proposed levy. Id. § 6330(c)(3)(A). Additionally, the Office of Appeals must consider the issues raised by the taxpayer, and “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.” Id. § 6330(c)(3)(B)-(C).

Following the CDP hearing, the Office of Appeals issues a Notice of Determination. Treas. Reg. § 301.6330-1(f)

. In the Notice, the Office of Appeals details its findings and decisions on all matters it considered in the hearing; sets forth any agreements it made with the taxpayer, any relief it provided to the taxpayer, and any future actions required from the taxpayer or the IRS; and advises the taxpayer of his or her right to seek judicial review by timely filing a petition in the Tax Court. Treas. Reg. § 301.6330-1(e)(3), Q & A (E8); see also 26 U.S.C. § 6330(d)(1) (permitting taxpayer to petition Tax Court for review “within 30 days of a [Notice of] determination”). The Tax Court reviews the Office of Appeals' administrative “determination[s]—including the verification that ‘the requirements of any applicable law or administrative procedure have been met’—for abuse of discretion.” Meyer v. Comm'r , 106 T.C.M. (CCH) 599, 2013 WL 6169420, at *4 (2013). If the validity of the underlying tax liability is properly at issue in the CDP hearing, the Tax Court reviews that issue de novo. Craig v. Comm'r , 119 T.C. 252, 260 (2002).

Keeping that framework in mind, we turn to the facts of this case.

James Cropper didn't file federal income tax returns for tax years 2006, 2007, or 2008. The IRS prepared substitute returns for each tax year and mailed three separate deficiency notices via certified mail to Cropper's last known address, a post office box in Norwood, Colorado. After Cropper failed to respond to the deficiency notices, the IRS assessed tax liabilities against Cropper for each of the three tax years. The IRS subsequently mailed Cropper (1) a lien notice, dated October 6, 2011, informing him that his property was subject to a federal tax lien; and (2) a levy notice, dated May 7, 2012, informing him of its intent to levy his property.

In response to the levy notice, Cropper timely requested a CDP hearing. A settlement officer with the Office of Appeals informed Cropper of a scheduled telephone CDP hearing on September 20, 2012. Before the scheduled hearing, the settlement officer obtained documents from the IRS, reviewed Cropper's IRS account transcripts, verified that the IRS followed all applicable administrative and legal procedures before proceeding with the proposed levy, confirmed that the IRS sent all required notices to Cropper's Norwood address, and determined that the tax assessments were therefore valid.

Because Cropper subsequently failed to participate in the scheduled telephone CDP hearing and didn't respond to the officer's requests to reschedule it, the officer informed Cropper that she would conduct the CDP hearing through written correspondence. Over the next two months, Cropper responded to the officer's letters by asserting that he never received the deficiency notices and never had an opportunity to challenge the underlying tax liabilities. But Cropper failed to submit any documents the officer requested for purposes of the CDP hearing, any evidence to support his assertion that he never received the deficiency notices, or any information to dispute the amount of the underlying tax liabilities.

The Office of Appeals subsequently issued a Notice of Determination concluding that (1) the IRS followed all legal and administrative requirements to proceed with the levy action, (2) the amounts of the underlying liabilities were valid and Cropper failed to submit any evidence to the contrary despite being provided the opportunity to do so, and (3) the levy action balanced the need for the efficient collection of taxes with the legitimate concerns of the taxpayer.

Cropper timely sought judicial review, and the parties agreed to submit the case to the Tax Court on stipulated facts and without a trial.² Cropper argued that the Office of Appeals (1) should have allowed him to challenge the underlying tax liabilities because he never received the deficiency notices, (2) should have provided him a face-to-face CDP hearing, (3) failed to provide him with evidence to support the IRS' claim to the assessed taxes, and (4) erroneously determined that the IRS met all applicable requirements to proceed with the proposed levy. Cropper v. Comm'r , 108 T.C.M. (CCH) 34, 2014 WL 3408096, at *3 (2014)

.

The Tax Court sustained the Office of Appeals' determination. The court reasoned that regardless of whether Cropper received the deficiency notices, he “failed to make any specific contentions or to proffer any evidence before the Court showing why [the Commissioner's] liability determinations [were] incorrect.” Id. at *5

. The court also found that the Office of Appeals didn't abuse its discretion in determining that (1) Cropper wasn't entitled to a face-to-face CDP hearing, (2) the IRS properly mailed deficiency notices to Cropper's last known address, and (3) the IRS met all applicable requirements before proceeding with the levy action. Id. at *5–6. Cropper timely appeals.³

Discussion

We ordinarily review the Tax Court's factual findings for clear error and its conclusions of law de novo. Mitchell v. Comm'r , 775 F.3d 1243, 1246 (10th Cir. 2015)

. However, when the Tax Court decision rests on its review of an Office of Appeals' determination following a CDP hearing, we apply the same standards as the Tax Court. Thus, we review the Office of Appeals' determinations about challenges to the amount of the underlying tax liability de novo and its administrative determinations unrelated to the amount of tax liability for abuse of discretion. Gyorgy v. Comm'r , 779 F.3d 466, 472–73, 480 (7th Cir. 2015) ; Jones v. Comm'r , 338 F.3d 463, 466 (5th Cir. 2003).⁴

Here, Cropper doesn't challenge the amount of the underlying tax liabilities.

Instead, he argues that the Office of Appeals abused its discretion in determining the IRS met all applicable requirements to proceed with the proposed levy. Primarily, he contends the IRS failed to prove it mailed the deficiency notices as required by 26 U.S.C. § 6212(a)

. But he also asserts that the IRS' alleged failure to produce proof of mailing demonstrates that he never actually received the deficiency notices. According to Cropper, because he never actually received the deficiency notices, he is entitled to relief under 26 U.S.C. § 6330, which he interprets as “stat[ing] that ‘if the person did not receive any statutory notice of deficiency,’ he is lawfully entitled to have those notices set aside.” Aplt. Br. 32 (quoting § 6330 ).

We conclude the IRS sufficiently proved that it mailed the deficiency notices and is therefore entitled to a presumption that Cropper received those notices. And Cropper's mere assertion that he didn't receive them doesn't rebut that presumption. Moreover, even if Cropper didn't receive the notices, he is mistaken that § 6330

entitles him to have the tax assessments set aside.

I. The Office of Appeals didn't abuse its discretion in determining that the IRS properly mailed deficiency notices to Cropper's last known address as required by 26 U.S.C. § 6212.

In determining that the IRS can proceed with a proposed levy, the Office...